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SMSF Updates

Who Signs the Contract of Sale for Property Purchase in the SMSF?

11 Sep, 2019

There are four commonly seen options for signing the contract of sale for a property purchase in an SMSF using LRBA, but we only recommend the first one for our SMSF clients.

  1. Bare Trustee as Trustee for the Bare Trust

This is commonly used for our clients because the bare trust trustee is the legal owner of the property to be purchased, and the bare trust is the holding entity.

We also recommend this option due to its simplicity.

Please note that the bare trust must be established when you sign the contract of sale.

SMSF trustees may be concerned about double stamp duty if they have not used the correct purchaser name in the contract of sale. However, based on our previous experience, there is no stamp duty is applicable when the title is transferred to the SMSF after the mortgage is discharged, provided that:

  • The bare trust trustee is used in the contract of sale.
  • The bare trust deed is properly prepared and executed.
  • The timing of the sequence of events is correct. For example, the creation date  of the bare trust and the date of exchange of Contracts. If it is dated properly,  double stamp duty may be payable. 
  1. The Bare Trust Trustee

Some lawyers suggest that the purchaser is the bare trust trustee and not to mention the bare trust name in the contract of sale. However, in DKLR Holdings Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW), it was held that double duty may apply where the purchaser in the contract is the trustee.

Therefore, we DO NOT recommend this option for iCare Super clients.

  1. Bare Trust Trustee as Trustee for SMSF Trustee as Trustee for SMSF and/or Nominee

Some SMSF lawyers have suggested using the above format as the purchaser in the contract of sale. This format will show the custodian relationship between the bare trust and the SMSF and also their respective trustee names.

We do not recommend this option due to its complexity and legal implications. However, you CAN choose these names as the purchaser if you have been advised by legal professionals in writing.

  1. SMSF Member Name and/or Nominees

SMSF trustees should NOT use any SMSF member, other purchaser names, and/or nominees as the purchaser on the contract of sale, to avoid any SMSF compliance issues and potential double stamp duty.

If you borrow to buy properties in your SMSF, please contact us for guidance, including bare trust setup, loan application, and LRBA issues.

Disclaimer: This article is for general information only. It is not intended as instructions or advice. If your SMSF is not under our administration, please consult with your lawyer, accountant, or SMSF administrator. SMSF and property laws and rules change from time to time and may vary between states or territories. We are not liable for any stamp duty/CGT implications or financial losses if you act on the information from this page.

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